If in the future you find yourself selling your excess solar panel energy to your neighbor via secure blockchain, you’ll have one startup’s actions on President Street in Brooklyn to thank. That’s where experimental microgrid provider TransActive Grid has posted its first two TransActive Grid Element meters inside residential units so that residents can exchange energy via a nascent blockchain marketplace. They’ve already made it a reality: Early last month, two Brooklyn residents completed the first peer-to-peer energy exchange, swapping watts for U.S. dollars.

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TransActive Grid isn’t setting out to topple utility monopolies; rather, the joint venture between LO3 Energy and blockchain tech company ConsenSys is building out microgrids as a proof-of-concept project. Indeed, LO3 is actively chatting with utilities to explore how microgrids can fit in the future of energy grids, says LO3 founder and principal Lawrence Orsini.

That future involves a potent reckoning for energy utilities, believes Orsini, as tech advances and less restrictive energy laws loosen the iron grip utilities have on controlling energy exchange. Microgrids are small, local grids that can isolate themselves and break away from the main grid, either in the event of an emergency (say, the next Hurricane Sandy) or to handle energy exchange on a peer-to-peer level.

People can already legally exchange energy–it happens every time you sign up for Green Mountain Energy or a similar eco-friendly energy provider and contract to buy their energy. Technically speaking, you’re buying their energy credits (known as renewable energy certificates). Odds are, your home appliances are still using the electricity produced by a local natural gas or coal plant, but paying for renewable energy certificates places orders for more energy from renewable sources, which means natural gas and coal plants should produce proportionately less energy.

TransActive Grid’s exchange is built on ConsenSys’s blockchain tech. Specifically, it uses Ethereum, ConsenSys’s blockchain platform that it uses to build decentralized applications. Most people use banks and financial institutions as middlemen to guarantee that their money goes only where they want it to. The blockchain concept provides that level of security, claims ConsenSys (to learn more about how a blockchain provides security via its distributed ledger model using bitcoin as an example, watch this excellent video).

LO3 deployed two of its TransActive Grid Element devices, which mount next to a residential apartment building’s utility meter, track energy moving from energy collectors on the building (e.g., solar panels) into the greater energy grid, and register that on the blockchain. They have been installed in two buildings on President Street in Brooklyn.

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Even then, that locally grown energy might end up being more expensive than the energy produced in bulk at a power plant. People already switch to Green Mountain and other renewable energy sources, so it’s not a big stretch to imagine the value of buying local energy. For one thing, it’s an opportunity for the consumer to choose where their energy comes from. But until energy regulations change in U.S. states, those purchases will have to happen outside the energy grid.

“New York in the very near future is probably going to allow peer-to-peer transactions,” says Orsini. “You can pay anybody anything you want for whatever they have. It’s not a transaction across the utility grid, it’s happening above the utility grid between people. Until the policy changes, you’re not going to be able to transact that through a utility grid.”

“It’s not a transaction across the utility grid, it’s happening above the utility grid between people.”

For now, TransActive Grid’s blockchain simply cryptographically secures transactions and exchange of goods–in this case, energy. Energy grid and utility security is a different beast entirely, and blockchain won’t directly solve the hacking vulnerabilities mentioned above, but at least TransActive Grid’s energy transactions would not conceivably add new vulnerabilities to an existing utility.

But Orsini believes that as more progressive energy laws are passed and microgrids edge into existence alongside traditional utilities, those utilities will adapt to the microgrid model. The forward-looking ones, anyway.

“There’s an opportunity for them to evolve their business models to include blockchain. There is a whole spectrum of utilities, ones that are aggressive and see where the markets are going all the way to ones that are going to have to be regulated out of existence or regulated into new business models,” says Orsini. “The progressive utilities that are looking at how this market is going to evolve are looking at how they are going to participate in a distributed energy economy–those are the ones that are going to be interested in something like this. This is an evolution of the utility market.”

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“This is an evolution of the utility market.”

Microgrids aren’t a new concept, but remain restricted by state regulations regarding who can handle and sell energy: In most states, this agency is dominated by a few energy monoliths. But a few states like New York, California, and Texas have passed progressive energy legislation that have paved the way for introductory debate on microgrids, like a recent town hall discussion in New Paltz, New York and microgrid feasibility research in Warwick, New York. But they’re still in a research phase, while TransActive Grid is live.

Now it’s a matter of testing how TransActive Grid’s system works out, technologically and socially, before they expand into other buildings in Brooklyn. Building out a real business model is a ways off: For now, TransActive Grid is working out the logistical kinks of people trading energy, one watt at a time.